Understanding COBRA for FSAs, HRAs & Specialty Benefits

When employees experience a qualifying event — like a reduction in hours or a job change — COBRA (the Consolidated Omnibus Budget Reconciliation Act) lets them keep certain health benefits for a limited time. But while most employers know COBRA applies to medical, dental, and vision plans, there’s often confusion about other types of benefits such as flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).

If your company offers these accounts, it’s important to understand what’s required — and how to avoid compliance pitfalls.

COBRA and Flexible Spending Accounts (FSAs)

Not all FSAs are treated the same under COBRA:

• Health FSAs — These typically fall under COBRA. Employees who lose eligibility mid-year may have the option to continue contributions and access their account balance through the end of that plan year.

• Dependent Care FSAs — Because they’re not considered medical benefits, COBRA doesn’t apply.

• Commuter or Parking FSAs — Also not subject to COBRA.

Takeaway: Only health FSAs usually require continuation coverage. Other types of FSAs are excluded.

COBRA and Health Reimbursement Arrangements (HRAs)

HRAs can be a gray area:

• Many HRAs are considered group health plans and therefore must follow COBRA continuation rules.

• If the HRA is tied to your main health plan, it usually follows the same COBRA process.

• Standalone HRAs vary — their compliance status depends on how the plan is designed.

Takeaway: If you offer an HRA, don’t assume it’s exempt. Its setup determines whether COBRA applies.

Other Popular Benefits (Usually Not Covered)

Some benefits simply fall outside COBRA:

• Wellness or lifestyle stipends (gym, fitness, mental health apps)

• Professional development or education reimbursement

• Commuter or parking benefits

Since these don’t count as health care plans, there’s generally no continuation requirement.

What Employers Should Watch For

• Plan design matters — Standalone vs. integrated benefits can change COBRA obligations.

• Premium calculations — If continuation is required, you must determine the correct cost plus administrative fees.

• Compliance documentation — Proper notices and tracking are critical to avoid penalties.

• State laws — Some states go beyond federal COBRA and may require additional steps.

Administering COBRA can get complicated quickly, especially if you have multiple plan types and employee changes throughout the year.

How Southern Benefit Group Makes It Easier

Southern Benefit Group has been helping businesses design and manage employee benefits since 2002. For more than two decades, we’ve supported HR teams as they balance compliance with offering competitive, cost-effective benefits. Here’s how we can help:

• Benefit plan design & strategy — We tailor FSAs, HRAs, and other accounts to fit your team’s needs and budget.

• COBRA compliance — We handle notices, eligibility tracking, and premium calculations to keep you compliant and reduce risk.

• Ongoing administration — Our team manages enrollments, terminations, and billing, so your HR staff can focus on higher-value work.

• Employee education — We help your team understand their options and use their benefits wisely.

With over 20 years of experience, we bring deep expertise and personal service to every client relationship.